Correlation Between International Paper and Lineage Cell
Can any of the company-specific risk be diversified away by investing in both International Paper and Lineage Cell at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining International Paper and Lineage Cell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Paper and Lineage Cell Therapeutics, you can compare the effects of market volatilities on International Paper and Lineage Cell and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in International Paper with a short position of Lineage Cell. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Paper and Lineage Cell.
Diversification Opportunities for International Paper and Lineage Cell
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Lineage is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding International Paper and Lineage Cell Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lineage Cell Therapeutics and International Paper is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on International Paper are associated (or correlated) with Lineage Cell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lineage Cell Therapeutics has no effect on the direction of International Paper i.e., International Paper and Lineage Cell go up and down completely randomly.
Pair Corralation between International Paper and Lineage Cell
Allowing for the 90-day total investment horizon International Paper is expected to under-perform the Lineage Cell. But the stock apears to be less risky and, when comparing its historical volatility, International Paper is 2.81 times less risky than Lineage Cell. The stock trades about -0.23 of its potential returns per unit of risk. The Lineage Cell Therapeutics is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 46,550 in Lineage Cell Therapeutics on January 20, 2024 and sell it today you would lose (2,700) from holding Lineage Cell Therapeutics or give up 5.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 86.36% |
| Values | Daily Returns |
International Paper vs. Lineage Cell Therapeutics
Performance |
| Timeline |
| International Paper |
| Lineage Cell Therapeutics |
International Paper and Lineage Cell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Paper and Lineage Cell
The main advantage of trading using opposite International Paper and Lineage Cell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Paper position performs unexpectedly, Lineage Cell can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lineage Cell will offset losses from the drop in Lineage Cell's long position.| International Paper vs. Reynolds Consumer Products | International Paper vs. Ball Corporation | International Paper vs. Crown Holdings | International Paper vs. Myers Industries |
| Lineage Cell vs. Purple Biotech | Lineage Cell vs. BioLine RX | Lineage Cell vs. Clal Biotechnology Industries | Lineage Cell vs. Evogene |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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